Medical Malpractice Bill update

	Medical Malpractice Update

Analysis of House Bill 1802, Session of 2002, Printer's No. 3420, with comments

By Clifford A. Rieders, Esq.

After almost a year and a half of debate on medical malpractice legislation, the Pennsylvania House and Senate on March 13 passed an amended version of House Bill 1802 dealing with medical malpractice insurance. The bill is expected to be signed by the Governor on March 20, 2002.
The medical community has already charged that the Bill is only a beginning. The Pennsylvania Trial Lawyers Association reluctantly agreed to a compromise, which in fact was the second compromise the organization agreed to. The medical community, at the 11th hour, walked out on the first compromise.
Without question, the best thing about this Bill, from the point of view of the Pennsylvania Trial Lawyers Association, is the Patient Safety Authority. The remainder of the Bill does little else other than to bill costs into the medical malpractice litigation system. The medical industry, unfortunately, walked away from every real money saving they could have had with regard to their premiums.

What follows is the sum and substance of the Bill, in some detail.

1. Chapter 1, Preliminary Provisions, Section 101, et seq.
1.1 The action will be known and cited as the Medical Care Availability and Reduction of Error (Mcare) Act.
The title of this Bill is very important, and there is actually a bit of history in connection with it. The idea was for this legislation to deal essentially with the availability of medical care and reduction of medical errors. This is not intended primarily to be a bill in the nature of tort reform to reduce the rights of patients.

1.2 Section 102 declares the policy to be to assure medical care through a comprehensive and high-quality health care system. A stated policy is to afford "fair compensation," and of course reduce medical errors.
2. Chapter 3, Patient Safety
2.1 There is established a body corporate to be known as the Patient Safety Authority. The Board of the Authority consists of 11 members, 5 of whom have some connection with the health care industry and 4 of whom do not. The membership breaks down as follows: physician general or physician appointed by the governor; four (4) residents of the Commonwealth appointed by various differing political leaders in the legislature; a health care worker who was a physician and is appointed by the governor; a health care worker who is a nurse and appointed by the governor; a health care worker who is a pharmacist and appointed by the governor; a health care worker employed by a hospital, appointed by the governor; two (2) residents, one of whom is a health care worker and one of whom is not a health care worker, appointed by the governor.
    The Authority shall be formed within sixty (60) days of the effective date of this section.
    The Authority will collect data on performance indicators and patterns in frequency or severity at certain medical facilities or certain regions of the Commonwealth.
    A health care worker may file an anonymous report regarding a serious event with the Authority. The manner of investigation is set forth.
    There shall be an annual report to the General Assembly no later than May 1, 2003, and annually thereafter.
    Assessments will give the Authority a budget not exceeding $5 million.

2.2 Under Section 307, a medical facility shall develop, implement and comply with an internal patient safety plan as set forth in the Act. As part of this plan, a system for health care workers of a medical facility to report serious events and incidents shall be established which is accessible 24 hours a day, 7 days a week. There is prohibition against retaliation where a health care worker reports a serious event or incident in accordance with the state's Whistleblower Law.
Within sixty (60) days of the effective date of this section, a medical facility shall submit its patient safety plan to the department for approval.

2.3 Under Section 308(a), a health care worker shall report a serious event or incident according to the patient safety plan within 24 hours.
2.4 Under Section 308(b), there is a duty to notify the patient, a family member or designee within seven (7) days of the occurrence or discovery of a serious event.
Again, whistleblower protection is given to the health care worker who reports the occurrence of a serious event.

2.5 Under Section 309, patient safety officer of a facility must be established to perform certain duties.
2.6 Section 311, Confidentiality and Compliance. Any documents, materials or information "solely prepared" or created for the purpose of compliance under Section 310(b) or of reporting under the various other sections are confidential and shall not be discoverable or admissible as evidenced in any civil or administrative action or proceeding. "Any documents, materials, records or information that would otherwise be available from original sources shall not be construed as immune from discovery or use in any civil or administrative action or proceeding merely because they were presented to the patient safety committee or governing board of a medical facility." The intention is to make sure that committees created under the Act are given protection under the Pennsylvania Peer Review Protection Act, but no more. No expansion in protection was intended.

2.7 Section 311(b) meanings. No person who performs responsibility or participates in any meetings of the patient safety committee established under the Act or the governing board of a medical facility pursuant to Section 310(b) shall be allowed to testify to any matter. However, "the person shall be allowed to testify as to any matters within the person's knowledge which was gained outside of the person's responsibilities or participation on the patient safety committee or governing board of a medical facility pursuant to Section 310(b)."

2.8 Section 311(c) makes clear that the confidentiality protection set forth apply only to documents, materials or information prepared or created pursuant to the responsibilities of the patient safety committee or governing board specifically established under this Act and nothing else.

2.9 Under Section 311(d), any of the documents, materials or information sent to the Authority or department in connection with the requirements under the Act, shall not be discoverable or admissible. This shall also apply to testimony of any current or former employee of the Authority or department.

2.10 However, Section 311(e)(2) does not shield current or former employees of the Authority or department with respect to findings or actions by the department or the department of state which are public records.
The department may have access to any of the information developed for licensure purposes.

2.11 Section 311(g), Original Source Document. There is an important exception contained with regard to the confidentiality. In the event that an original source document is unavailable from the health care worker or medical facility in a civil action, the department may be required to release the original source document. A court order is required under this section.

2.12 Section 311(i), Liability. One who provides information is not liable unless the information is false and the person supplying the information knew or had reason to believe that the information was false and was motivated by malice.

2.13 Section 312, Patient Safety Discount. A patient safety discount is supposed to be developed as a result of compliance with the Act, but the amount of the discount is not set forth.

2.14 Section 313, Medical Facility Reports Notifications. A medical facility shall report the occurrence of a serious event to the department and the Authority within 24 hours of the medical facility's confirmation of the occurrence of the serious event.
A medical facility shall report the occurrence of an infrastructure failure to the department within 24 hours of the medical facility's confirmation of the occurrence or discovery of the infrastructure failure.

2.15 Section 313(e), Notification to Licensure Boards. If a medical facility discovers that a licensee providing services in a medical facility failed to report an event, the medical facility shall notify the licensee's licensing board of the failure to report.

2.16 Section 313(f), Failure to Report or Notify. Failure to report a serious event or infrastructure failure or to develop a patient safety plan or notify a patient as required is deemed to be a violation of the Health Care Facilities Act. Fines may be $1,000 per day.

3. Medical Professional Liability.
3.1 Section 502, Declaration of Policy. The concept is to ensure fair legal process and reasonable compensation.
3.2 Informed consent. The Supreme Court decision in Duttry is reversed. Under Section 503(d)(2), a physician may be liable for failure to seek a patient's informed consent if the physician knowingly misrepresents to the patient his or her professional credentials, training or experience.

3.3 Section 507, Advance Payments. No advance payment by a health care provider or an insurance company shall be admissible by a claimant.

3.4 Section 508, Collateral Sources. A claimant is precluded from recovering damages for past medical expenses or past lost earnings incurred to the time of trial to the extent that the loss is covered by a private or public benefit or gratuity that the claimant has received prior to trial. Therefore, there may be cases where, prior to trial, it may be prudent to stop receiving those benefits.

3.5 Section 508(b), Option. The claimant has the option to introduce into evidence at trial the amount of medical expenses actually incurred (presumably, that means that have been paid), but the claimant shall not be permitted to recover for such expenses as part of the verdict except to the extent that the claimant remains legally responsible for the payment.
There is no subrogation, except as set forth in the Act.
Collateral source does not apply to life insurance, pension or profit sharing plans, or other deferred compensation plans. It does not apply to social security benefits. It does not apply to cash or medical assistance subject to repayment to the Department of Public Welfare, and it does not apply to public benefits paid or payable under a program which, under federal statute, provides for right of reimbursement which supersedes state law for the amount of benefits paid from a verdict or settlement.

3.6 Section 509, Payment of Damages. The trier of fact must make a determination with separate findings for each claimant, except for collateral sources (past damages) for the following:

1. Past Medical and related expenses, presumably in one lump sum.
2. Past Loss of earnings, presumably in one lump sum.
3. Past Non-economic loss, in one lump sum.
4. Future damages for medical and other related expenses by year.
5. Future Loss of earnings or earning capacity, in a lump sum.
6. Future Non-economic loss, in a lump sum.

Apparently, there is no requirement to list separately those collateral sources unless they fall under the exceptions permitting recovery, although the wording is not entirely clear.

3.7 Section 508 (b), Future Damages. The future damages set forth in the findings for medical and other related expenses shall be paid as periodic payments after payment of proportionate share of counsel fees and costs.
    There must be a reduction to present value.
    The trier of fact may vary the periodic payments to account for different annual expenditure requirements, including immediate needs.
    The trier of fact shall provide for the purchase and replacement of medically necessary equipment in the years that expenditures will be required as may be necessary.
    The trier of fact may incorporate into future medical expense award for inflation and medical care improvements.
    Future damages for medical and other related expenses shall be paid in the years the trier of fact finds they will accrue, although that is somewhat inconsistent with the fact that the trier of fact may vary the amount of periodic payments to account for different annual expenditures, including immediate needs.
    Liability to a claimant for periodic payments terminates upon claimant's death.
    Defendants must purchase an annuity contract, trust, or otherwise qualified funding plan approved by the court. If there is a default, payment would come from the Medical Care Availability and Reduction of Error Fund, or if it has ceased operations, from PIGA.
    The periodic payment scheme does not apply if claimant objects and stipulates that the total amount of future damages for medical and other related expenses without reduction to present value does not exceed $100,000.

3.8 Section 510, Reduction to Present Value. Future damages for loss of earnings or earning capacity shall be reduced to present value. These damages may be presented with evidence of the effective productivity and inflation.

3.9 Section 511, Preservation Accuracy of Medical Records. Medical records must be maintained and preserved. But in any case in which claimant proves, by a preponderance of the evidence, that there has been an intentional alteration or destruction of medical records, the court, in its discretion, may allow the jury to consider whether such intentional alteration or destruction constitutes an adverse inference. Where the destruction is negligent or unintentional, the statute does not address the situation and hence prior law would apply, permitting an adverse inference in the event that the medical health care provider had an opportunity to maintain the records properly and failed so to do. The statute also does not prevent the court from permitting counsel to argue the destruction of the records, whether intentional or unintentional, even if no adverse inference charge is given.

3.10 Section 512, Expert Qualifications. The following qualifications are necessary:

1. Physician's license to practice medicine in any state or the District of Columbia.
2. Be engaged in or retired within the previous five (5) years from active clinical practice or teaching. But this may be waived if the court determines that the expert is otherwise competent.
3. The expert must be substantial familiar with the applicable standard of care as of the time of the alleged breach.
4. Practice in the same subspecialty as a defendant physician or under some specialty which has a substantially similar standard of care, except that a court may waive this if the expert is trained in the diagnosis or treatment of the condition and the defendant physician provided care for that condition and such care was not within the physician's specialty or competence. Practice of the same subspecialty is also waived if the court determines that the expert possesses sufficient training, experience and knowledge to provide the testimony as a result of active involvement in teaching of medicine in the applicable subspecialty within the last five (5) years.
Note that board certification is not necessary, and board certification in the same subspecialty is not necessary.

3.11 Section 513, Statute of Repose. The statute of repose is seven (7) years from the date of the alleged tort or breach of contract, but does not apply to foreign objects left in a person's body.
No cause of action asserting a medical claim may be commenced by or on behalf of a minor seven (7) years from the date of the alleged tort or breach of contract or after the minor attains the age of 20 years, whichever is later. Therefore, in the case of injury at birth, suit may be brought up until the age of 20.
If a claim is brought pursuant to the Wrongful Death & Survival Act, the action must be commenced within two (2) years after death in the absence of an affirmative misrepresentation or fraudulent concealment of the cause of death.

3.12 Section 514, Interbranch Commission on Venue Established. The Commission will have as its members the following:

1. Chief Justice of the Supreme Court, or his designee;
2. Chairperson of Civil Procedural Rules Committee, who is Chairperson of the Commission;
3. A judge of the Court of Common Pleas appointed by the Chief Justice;
4. Attorney General, or his designee;
5. Counsel General;
6. Two attorneys-at-law appointed by the Governor;
7. Four (4) individuals appointed by various legislative leaders.

3.13 Section 515, Remittitur. The court may consider, on remittitur, evidence with regard to the availability or access to health care in the community if the defendant health care provider is required to satisfy the verdict. It is presumed from the way the section developed that this section will only apply if there was no insurance available or to that portion of the verdict not covered by insurance, including excess insurance.

3.14 Ostensible agency is clarified. A hospital will be held responsible on the basis of ostensible agency if a reasonably prudent person in the patient's position would be justified in the belief that the care in question was being rendered by the hospital or its agents, or the care in question was advertised or otherwise represented to the patient as care being rendered by the hospital or its agents. The original draft of this section was much more narrow, and there was a specific intent to codify the capon decision.

4. Chapter 7 - Insurance.

For policies issues or renewed in the calendar year 2002, the basic insurance coverage will be $500,000 per occurrence.
    Unless the Insurance Commissioner finds that basic insurance coverage capacity is not available, for policies issued or renewed in the calendar year 2006, the basic coverage shall go to $750,000 per occurrence.
    The same test is applied at three years, which, if met, requires basic coverage in the amount of $1 million per occurrence for a participating health care provider.
    This represents a reduction from $1.2 million to $1 million in coverage required to be carried.

4.1 Section 711(g). An insurer providing medical professional liability insurance shall not be liable for payment of a claim against a health care provider for any loss or damages awarded in excess of the basic required. If a claim exceeds the limits of a participating health care provider's basic insurance coverage or self-insurance plan, the Fund shall be responsible for payment of the claim up to the Fund liability limits.

4.2 Section 711(h). No insurer providing medical professional liability insurance with liability limits in excess of the Fund's liability limits to a participating health care provider shall be liable for payment of a claim against the participating provider, except the losses and damages in excess of the Fund coverage limits.

4.3 Section 712, Medical Care Availability and Reduction of Error Fund. The Fund, of course, is to cover amounts in excess of the basic insurance liability required.
    CAT Fund money will be transferred to this Fund.
    For calendar year 2002, the Fund is responsible for $700,000.
    For calendar year 2003 and each year thereafter, the limit of liability of the Fund shall be $500,000 for each occurrence.
    If the basic insurance coverage requirement is increased in accordance with Section 711(d)(3), the limit shall be $250,000 for each, and eventually the liability of the Fund would go down to zero.
    Therefore, for 2002, the total is $700,000. For 2003, the total drops down to $1 million.
    Discount on surcharges and assessments. A mere 5% discount is given equally to hospitals and participating health care providers that are members of one of the four highest rate classes of the prevailing primary premium. 50% of the aggregate discount shall be granted equally to all participating health care providers.
    For calendar year 2003, that discount is 10%, given the same way.
    For calendar year 2005, a discount not to exceed the aggregate sum to be deposited in the Fund will be given.

Claims rating. Claims rating shall not exceed 20%. If three claims have been paid during the past five most recent claims periods by the Fund, a 10% increase shall be charged. For four or more claims, a 20% charge shall be levied. This is obviously meaningless with regard to typical underwriting claims histories.

Payment of Claims. Payment shall be made on or before December 31 and the following August 31, as is currently the situation.

Supplemental Funding. The money from the auto CAT Fund (about $400 million) shall be moved over to the new Fund, but it can only be used to reduce surcharges and assessments. What about claims handling? This is not addressed.

Waiver of Right to Consent to Settlement. A participating health care provider may maintain the right to consent to settle in a basic insurance coverage policy based upon the payment of an additional premium amount. Apparently, the claims handler does not have to respect this consent to settle.

Administration of Fund. The department shall contract with an entity for the administration of claims. However, none of the money that comes over from the auto CAT Fund supposedly can be used for this, which would make for an interesting administrative problem.

Failure to Notify. If a basic coverage insurer or self-insured participant fails to notify the department and the department has been prejudiced, the insurer or provider shall be solely responsible for payment of the entire award or verdict that results.

Releases. A basic coverage insurer or self-insurer may settle with a claimant and obtain a release, which payment shall have no affect upon any claim against the Fund or its duty to continue defense of the claim.

Mediation. Upon request of a party to a medical professional liability claim within Fund coverage limits, the department may provide for a mediator where multiple carriers disagree on the disposition or settlement of a case. Upon the consent of the parties, the mediation shall be binding.

Delay Damages and Post-Judgment Interest. Delay damages and post-judgment interest shall be paid by the Fund and not charged against the participating health care's annual aggregate limit. The basic coverage insurer or self-insured shall be responsible for its proportionate share of the delay damages and post-judgment interest.

4.4 Section 715, Extended Claims. If a claim is made more than four (4) years after the breach of contract or tort occurred, and the claim is filed within the applicable statute of limitations, the claim shall be defended by the department if the department received a written notice for indemnity and defense within 180 days of the date on which the notice of the claim is first given to the participating health care provider or its insurer.
Subchapter C, Joint Underwriting Association. There is established a non-profit joint underwriting association, to be known as the Pennsylvania Professional Liability Joint Underwriting Association. The rates may not exceed those applicable to similarly situated health care providers. Whether this will be able to serve as a discount "company" is uncertain.

5. Subchapter D, Regulation of Medical Professional Liability Insurance.

Reporting by insurance companies concerning total amount of claims, reserve and disposition, including settlement must be made.
The report will also go the legislature.

5.1 Section 903, Reporting. A physician shall report to the State Board of Medicine or the State Board of Osteopathic Medicine within sixty (60) days of the following:

1. Notice of complaint in a medical professional liability action.
2. Information regarding disciplinary action.
3. Information regarding sentencing of the physician for a crime.
4. Information regarding arrests.

The licensure board shall develop criteria and standards for review based on the frequency and severity of complaints against a physician. An investigation based upon a complaint must be commenced no more than four (4) years from the date notice of the complaint is received. Within four (4) years, the licensure board itself must act upon information, including notice that a payment against a physician has been reported to the National Practitioner Data Bank. The following must be investigated by the licensure board:

1. Payment as reported to the NPDB.
2. Notice that payment in a medical professional liability action against the physician has been reported to the licensure board by an insurer.
3. Notice of a report as set forth above.

5.2 Section 905, Action on Negligence. Licensure board can take action based upon negligence.

5.3 Section 906. Confidentiality agreements. No confidentiality agreement can act as a bar to keep the licensure board from getting information.

Confidentiality. Although the work of the State Board of Medicine is confidential, this subsection shall not preclude or limit introduction of the contents of an investigative file or related witness testimony in a hearing or proceeding held before the State Board of Medicine itself.

Disclosures not prohibited with regard to public disciplinary proceeding or hearing.

Civil penalties increase.

Licensure board report. Certain reporting is required.

5.4 Section 5104. Repeals. The following statutes are repealed:

1. Section 6506(c) of Title 75 of the Pennsylvania Consolidated Statutes is repealed.
2. Except as set forth in paragraphs (3), (4) and (5), the act of October 15, 1975 (P.L. 390, No. 111), known as the Health Care Services Malpractice Act, is repealed.
3. Section 103 of the Health Care Services Malpractice Act is repealed.
4. Except as provided in paragraph (5), Article VII of the Health Care Services Malpractice Act is repealed.
5. Section 701(e)(1) of the Health Care Services Malpractice Act is repealed.
6. Section 6506(b) of Title 75 of the Pennsylvania Consolidated Statutes is repealed insofar as it is inconsistent with section 712(m).

Effective Date. The following sections shall apply to causes of action which arise on or after the effective date of this section:

1. Section 504(D)(2), Reversal of Duttry.
2. Section 505(E), Allocation of Punitive Damages, 75% to the prevailing party and 25% to the medical care availability and reduction of error fund.
3. Section 508, Collateral Sources.
4. Section 509, Payment of Damages on Special Verdict Questions.
5. Section 510, Reduction to Present Value.
6. Section 513, Statute of Repose.
7. Section 516, Ostensible Agency.

5.5 This act will take effect as follows:

The following provisions shall take effect immediately:

1. Chapter 1, Preliminary Provisions.
2. Section 501, Scope.
3. Section 502, Declaration of Policy.
4. Section 503, Definitions.
5. Section 504, Informed Consent.
6. Section 505, Punitive Damages.
7. Section 506, Affidavit of Noninvolvement.
8. Section 507, Advance Payments.
9. Section 508, Collateral Sources.
10. Section 509, Payment of Damages.
11. Section 510, Reduction to Present Value.
12. Section 513, Statute of Repose.
13. Section 514, Interbranch Commission on Venue.
14. Section 515, Remittitur.
15. Section 516, Ostensible Agency.
16. Except as provided in paragraph (3)(i), Chapter 7.
17. Section 5101, Oversight.
18. Section 5102, Prior Fund.
19. Section 5103, Notice.
20. Section 5104(a)(1) and (2) and (b)(2), Repeals.
21. Section 5105 Applicability.
22. Section 5106, Expiration.
23. Section 5107, Continuation.

The following provisions shall take effect 30 days after publication of the notice under Section 5103:

1. Section 313, Medical Facility Reports and Notifications.
2. Section 314, Existing Regulations.

The following provisions shall take effect October 1, 2002:

1. Section 712(b) and (c)(1), Medical Care Availability and Reduction of Error Fund.
2. Section 5104(a)(4), Repeals.

The question has been raised whether the Act applies against newly added parties, and the answer is "no," not unless the Act is effective immediately as to those parties, which is not ordinarily the case in the way that this is drafted.

5.6 Constitutionality. Severability clause. It does not appear that there is any severability clause.

5.7 Constitutionality. It is clear that portions of this legislation are strictly procedural, such as the expert witness portion, and may be suspended by the Supreme Court. There is also an argument to be made that the section dealing with periodic payments and listing of damages on special verdict slips as required are procedural and should be suspended by the Supreme Court. That is an argument that can be made. It is also possible to make the argument that much of the legislation is "special" in nature, such as reducing to present worth damages, only in medical malpractice cases.

Conclusion

There will be much to write about, talk about, and teach in the future. No doubt the court will take these bones and put upon them organs, flesh, and doubtless even some fat. There is no formal legislative history, but there are a series of prior versions of the Bill that should be of some assistance. In the meantime, the Pennsylvania Trial Lawyers Association will keep its eye on patient safety, venue issues, and the development of the case law with regard to the tort issues.

Back to PaTLA